The SME Initiative is a concrete tool available for Member States to stimulate additional lending to SMEs by the banking sector. It offers a number of advantages, including:
- The possibility to offer unique financial products, including for riskier and innovative SMEs (two options: uncapped guarantees and joint securitisation);
- Early deployment of ESIfunds as the ex-ante assessment has already been carried out;
- No requirement for national co-financing;
- Easy cash flow management, in particular upfront payments from the Commission to the Member State
- The potential to generate a significant leverage effect via the combination of resources from the ERFD and/or EAFRD, Horizon 2020, COSME and EIB/EIF own resources
- State aid clearance
An uncapped guarantee for a new portfolio of loans has the important advantage of providing protection against losses which may occur until maturity and full reimbursement of each loan in a new portfolio, within a pre-determined guarantee rate (which ensures that the bank bears some risk to ensure alignment of interest). This can encourage banks to provide longer maturity loans to riskier SMEs. On the other hand, if such guarantees are provided by multilateral financial institutions with triple A rating (as is the case of the EIB/EIF), Regulatory Authorities may accept such guarantees as providing capital relief, meaning that banks can provide additional lending covered by such guarantees without having to set aside the corresponding economic capital (share capital) required by prudential rules (e.g. Basel III, Capital Requirements Directive IV).
The securitisation of existing or new portfolios of debt finance linked to the building up of new portfolios of new loans to SMEs has similar advantages in terms of freeing up banks’ assets and related economic capital which can be utilised for new lending to SMEs. If guaranteed by a top rated institution such as the EIB and EIF, securitised portfolios can be attractive to institutional investors (such as pension funds and insurance companies), drawing additional private funding to stimulate new SME lending.
Each of these products or a combination of the two can have a significant impact in terms of boosting additional bank lending to SMEs. Namely, undercapitalised and other riskier SMEs which would normally be faced with unbearable collateral requirements will have new opportunities of financing through the risk absorption possibilities offered by each of the above products under the SME Initiative. So far, Spain is implementing the SME Initiative, and preparations are being finalised for its implementation in Malta. Other Member States are encouraged to participate and therefore benefit from the intense preparatory work done. The Commission, in cooperation with the EIB/EIF and the Spanish and Maltese authorities, organises a workshop on the SME Initiative in Brussels (in the premises of the Committee of the Regions) on 23 April 2015, to explain its main advantages, but also to discuss concrete implementation-related arrangements and provide answers to all kinds of questions potentially interested Managing Authorities may have. See more...